August 6, 2003
Signatures? We don’t need no
Signatures? We don’t need no stinkin’ signatures! Well… at least in NY.
So says a Fed Judge for NY in his July opinion in AIH Acquisition Corp. v. Alaska Industrial Hardware, (S.D.N.Y. July 1, 2003) as he granted specific performance in Buyer’s favor even though seller refused the definitive acq K!
After extensive due diligence and negotiation, buyer’s counsel sent the definitive K to seller’s counsel in an email saying: “Attached is the final SPA. Everyone, including the lawyers, has stated it is final without qualification. Please endeavor mightily to have the SPA executed tomorrow. Thank you for your efforts.”
At the eleventh hour, guess what – Target’s majority shareholder refused to ink it.
The Court said signature-schmignature!: “Here, the parties had more than an oral agreement. They had a complete written agreement containing all material terms in final form with signatures coming the next day as a mere formality. … It is clear from this that the agreement was — and the parties were in agreement that it was — final and therefore binding even though signatures had not been affixed.”
Would it have been a good idea for seller’s counsel to send a reply email reminding buyer’s counsel that there’s no agreement until there’s execution and delivery? Probably – but that’s easy to say with my perfect 20-20 hindsight. (Nevertheless, score one for buyer’s counsel for his/her exquisite, self-serving email!).
Have I ever been lulled into thinking that merely saying (especially in correspondence) “subject to execution” is good enough? Maybe probably.
Will I think twice about making sure all confidentiality Ks, LOIs, and the like – and even minor things like an email – clearly state that we ain’t got no deal (i.e., nothing’s legally binding) until the definitive K is executed and delivered? Yep.
(Comments? Gripes? Pls feel free to email us: wilson.chu@haynesboone.com or lglasgow@gardere.com ).